BUDGETING AND CONTROLLING

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BUDGETING AND CONTROLLING

• Sairam

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Introduction

• Basis for anything- Planning for the future
• Forecasting -versus- Planning
• NOBODY CAN MASTER MIND THE FUTURE
• Budget is a calculated guess-work and systematic
  planning which are brought down to numerical
  estimates. The Budgetary control is a way of life
  for every successful businessmen.

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Preparation of a Budget

• How Budgets are being prepared?
• By Group discussions, modular planning and
  keeping the tempo to achieve the goals fixed by
  the Budgets keeping morale boosting baits for the
  staff members.
• Who prepares the Budget?
• Budget Committee prepares it and places it before
  the Board of Directors for approval

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Who constitute a Budget committee?

• Various department heads such as
• Finance
• Marketing
• Production
• Purchase
• Personnel
•  

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What is the key to Budget?

• Is it
• Finance
• Marketing
• Production
• Purchase
• Personnel or
• Anything else
•  

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Principal Budget Factor

• Limiting Factor / Key factor
• The factor which is the main criteria to
  determine the production or the most important
  factor to be considered in the decision making
  process
• Example Candle Manufacturing

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Types of Budget

• Functional Budgets
• Sales Budget
• Top To bottom Approach
• Bottom to Top Approach
• Production Budget
• Budgeted sales-Estimated Opening stock
  Estimated Closing Stock
• Purchase or Materials Procurement Budget
• Production in units x Materials requirement per
  unit-Estimated opening stockEstimated closing
  stock

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Functional Budgets (Contd.)

• Human Resource Development Budget
• Production in units x Labour requirement per unit
• Overhead Budget
• Cash Budget
• Finally, Master Budget

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Flexible Budgets

• Classification of expenses
• Fixed
• Variable
• Semi-variable- Ex Maintenance expenses (AMC
  Spares)
• Telephone expenses (Rent Charges)
• You can not generalize and say this expenditure
  is fixed and that is variable

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What is the end product of the Budget?

• Variance analysis Cost Variance (an
  introduction)
• Material cost variance
• Labour cost variance
• Overhead cost variance
• Revenue (Sales) variance

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Capital Budgeting techniques

• Payback period method
• Period it takes to recover the capital
• Net Present Value method
• Time value of money is considered in decision
  making
• Present values of future outflows and inflows are
  calculated using the Cost of capital and
  adjusted with the outflow at the 0th year to find
  out the NPV

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Capital Budgeting techniques(Contd.)

• Internal Rate of Return
• Time value of money is considered in decision
  making
• Rate at which the income is generated is the IRR

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ALL THE VERY BEST

• SEMINAR IS ONE FOR WHICH ONE PERSON SPENDS FEW
  SLEEPLESS NIGHTS TO MAKE PEOPLE SLEEP FOR A FEW
  HOURS

THANK YOU AND MAY GOD BLESS YOU